Can we “go it alone” or do we require “nudges” to achieve our goals?

There is a certain pride when we “go it alone” to accomplish a personal goal. You may wish to do a little more exercise or eat fewer calories, and your ability to set and achieve the goal is gratifying. Make your goal harder, and your pride increases. 

Though we all set and achieve certain goals, we cannot achieve all our goals. There are goals which we consider less important to us personally, but which collectively may be quite important. Energy conservation goals may fall into this set. We may want to reduce waste, but we may not have the time, focus or discipline to achieve energy waste reduction. We may be aware that energy conservation is valuable to us personally (to reduce utility costs), but that collectively the value is extremely large if others achieve similar goals. Energy conservation may be something which is “nice to do” but which many individuals cannot focus on. As a result, energy conservation may not get done.

There is research in the field of behavioral economics which may help. It turns out that energy policies have real-world consequences. It matters how the utility program designer addresses energy efficiency. Not all program designs are the same, and small changes in how we approach energy efficiency programs may result in significantly different results. As a consequence, you or I might save a few dollars, but collectively we may avoid the construction and operation of a new coal power plant.

EcoAlign, a full-service strategic marketing agency owned by DEFG LLC,  has released its fifth Project Energy Code report. “Nudges for Energy Conservation” was written by Dean Karlan, Professor of Economics, Yale University. Professor Karlan explains that:

a “nudge” is a mechanism to promote a desirable outcome while respecting individual choices. Nudges work by shifting the way in which people make choices and by helping people to follow through on their decisions. Nudges work through recognition that it matters how a decision is framed, through “commitment devices,” and through a change in the “defaults” (starting points) for decision making.

Research in behavioral economics is revealing how a nudge can affect energy consumption without forcing people to behave in pre-determined ways. While many individuals have goals to save energy, in practice they may fall short of their goals. Behavioral economics can help businesses and government agencies to better understand why individuals fail to follow through. The report explains why “nudges” work, what makes for a good “nudge” and how we can employ “nudges” to create measurable energy conservation savings.

As more energy usage information becomes available through advanced metering and the smart grid, nudges can be used by energy utilities and others in the design of energy efficiency programs and innovative electricity prices. Professor Karlan concludes:

Nudges can help individuals achieve their goals by aligning their short-term and long-term incentives, changing their perceptions of success and failure, or helping them to understand how to accomplish their goals.

It is my view that there is a “kernel of transformation” in Professor Karlan’s analysis:

How revolutionary would it be for utilities and other program designers to first inquire what residential consumers’ energy consumption goals are, then design a customized program around those goals, and then pro-actively help consumers meet those goals? Beginning program design with consumer goals turns program design on its head, but this could improve the ability of utilities and others to engage customers.

The EcoAlign report provides insight that will help utilities and other energy service businesses to close the “green gap” between consumers’ stated intentions and their actual behaviors. Project Energy Code is a research program developed by EcoAlign which provides ongoing analysis of consumer motivations and engagement with regard to energy consumption and the environment from an approach grounded in social sciences.

So, keep working on that exercise regime.  And watch what you eat.  And when you work on energy conservation program design, consider human behavior. Can you can get people to state their goals, make commitments, and follow through on those commitments? “Nudges” may help you.

The report is available at no charge by visiting EcoAlign’s Web site at www.ecoalign.com or DEFG’s Web site at www.defgllc.com.